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UBS reports a net profit after tax of CHF 1,385 million, down 9% compared to the previous quarter and 26% compared to second quarter 2000, once adjusted for goodwill amortization and significant financial events*. The Group's core businesses have delivered stable revenues despite unfavourable market conditions, and continue to improve their competitive position. Net new money flow of CHF 24 billion (CHF 45 billion for the half-year) was positive across all businesses.

In the second quarter 2001, UBS achieved a net profit after tax of CHF 1,385 million, 9% lower than first quarter 2001 once adjusted for goodwill amortization, and 12% down on a reported basis. Revenues proved stable, thanks to strong client franchises and a diverse business mix, declining by just 2% from first quarter 2001 to CHF 9,881 million.

Compared to the strong second quarter last year, net profit after tax was 26% lower once adjusted for significant financial events* and goodwill amortization, or 33% lower on a reported basis. About half of the decline in adjusted net profit was attributable to the performance of UBS Capital, which recorded a loss of CHF 351 million.

These results come against a backdrop of slowing economic growth in the major economies and uncertainty in securities markets, in contrast to the relatively favourable conditions of second quarter 2000.

Record levels of underwriting fees, portfolio management fees and investment fund fees helped to bring fee and commission revenue to an all-time high of CHF 5,375 million, representing 54% of the Group's revenues. Costs remain under tight control, with an increase of only 2% from first quarter 2001. Cost discipline ensures that scope remains for selective investment in strategic initiatives.

"Although these are tough markets, our core businesses remain in good health," said Luqman Arnold, President of the Group Executive Board. "During this quarter we have gained market share in key areas, and attracted significant new client assets to our wealth management businesses."

Net new money of CHF 24 billion brings the Group total for the year to CHF 45 billion, and total invested assets to CHF 2.56 trillion. Net new money in the private client units rose to CHF 17 billion from CHF 11 billion in the preceding quarter. UBS Asset Management achieved positive net new money in its institutional business (CHF 5 billion) for the first time since 1998, endorsing its successful investment performance.

Performance against Group financial targets: Pre-goodwill amortization and adjusted for significant financial events:

Annualized return on equity for the first half of 2001 was 16.8%, within the target range of 15-20%. The fall since first half 2000 reflects the very strong returns achieved in more buoyant markets in 2000, and the higher average equity in 2001 due to share issuance to fund the PaineWebber merger.

Basic earnings per share this quarter were CHF 1.37, a decline of 31% from second quarter 2000, but just 9% from first quarter 2001, reflecting relatively stable performance in difficult market conditions.

The cost/income ratio in second quarter 2001 was 77.2%, compared to 69.2% in second quarter 2000. Cost control remains a strong focus, with comparable costs below second quarter 2000 levels, the increase resulting from the addition of UBS PaineWebber.

Outlook Market conditions remain difficult to assess and, the chances of a short-term improvement in the operating environment seem low. Given that the summer months often see less activity, immediate prospects remain challenging. However, the competitive gains across UBS's businesses are encouraging. "We remain cautious and disciplined, given the uncertain outlook, but we are taking every opportunity we can to ensure our businesses come out of the market downturn stronger and better positioned than they went in," commented Luqman Arnold.

* Significant financial events

There were no significant financial events in second quarter 2001 or first quarter 2001.

In second quarter 2000, UBS's previously established liability for the US Global Settlement regarding World War II related claims was increased by CHF 200 million. This amount was charged to general and administrative expenses in Corporate Center. (See UBS Financial Report 2000 for the full definition of Significant Financial Events).

Results of the business groups

UBS Switzerland

Private and Corporate Clients achieved another strong result this quarter, despite weaker transaction volumes, with a net profit before tax of CHF 526 million, just 3% lower than first quarter 2001, and unchanged from second quarter last year. Revenues rose 3% to an all-time high, supported by the improved quality of the credit portfolio. Net new money inflows of CHF 0.8 billion derived principally from new client acquisition. Private Banking's profits decreased to CHF 729 million, down 7% from the first quarter 2001, reflecting weakness in securities trading volumes. Revenues held up well (-2%), thanks to the 72% proportion derived from asset-based fees, which rose again this quarter. Costs remained under control with operating expenses of CHF 877 million, just 2% higher than in the previous quarter and down 3% compared to second quarter 2000. Net new money rose again to CHF 8.5 billion, up from CHF 3.9 billion in the first quarter 2001. This strong inflow of net new money, combined with the appreciation of the US dollar against the Swiss franc, supported a 4% increase in invested assets to CHF 718 billion during the quarter.

UBS Asset Management

UBS Asset Management's pre-tax profit increased to CHF 57 million in second quarter 2001 from CHF 52 million in first quarter 2001, reflecting positive asset growth and higher mutual fund prices. Institutional invested assets grew from CHF 305 billion at 31 March 2001 to CHF 318 billion at 30 June 2001. Net new money for the quarter was CHF 5 billion, endorsing the sustained improvement in investment performance. Much of the inflow occurred in asset allocation and equity mandates in Europe and fixed income mandates in the Americas. Invested assets in mutual funds increased from CHF 332 billion at 31 March 2001 to CHF 348 billion at 30 June 2001. Net new money during the second quarter of 2001 was CHF 1 billion. Net new money continued to be particularly positive for European equity funds and for GAM.

UBS Warburg

UBS Warburg's Corporate and Institutional Clients business unit reported a pre-tax profit of CHF 1,137 million, 20% lower than in second quarter 2000 and 14% lower quarter on quarter, with revenues down 5% from first quarter 2001. Fixed income and foreign exchange revenues reached a record CHF 1,906 million, a 50% increase over the second quarter 2000. On the other hand equities trading revenues were more affected by difficult market conditions, bringing total Equities revenues down to CHF 1,612 million (-43% from second quarter 2000), despite robust client commissions. Corporate finance revenues rose by 9% over second quarter 2000, with market share of corporate fees up from 3.5% in 2000 to 4.7% for this half-year. UBS Warburg topped the league tables for M&A deals announced in Europe, and for international equity underwriting (ranking 11th in the same period last year). UBS Capital recorded a pre-tax loss of CHF 351 million this quarter (compared to a loss of CHF 282 million in the first quarter 2001). Depressed market conditions resulted in the postponement of planned divestments, or lower profits on disposals. In addition, deteriorating valuations across a range of industry sectors led to a number of write-downs in UBS Capital's portfolio. Prospects for this business in forthcoming quarters remain difficult, with limited opportunities for disposals. Although remaining dependent on divestment timing, value adjustments in third party funds, and the general environment for private equity valuations, UBS Capital does not expect significant additional losses this year.

The Private Clients business unit, centered on UBS PaineWebber, attracted net new money of CHF 8.7 billion, an increase of 28% over the first quarter 2001. Total revenues for the second quarter 2001 were CHF 1,837 million, just 1% lower than in first quarter 2001. Against a background of uncertain markets, this relatively strong performance reflects the strength of recurring fees, and the continued trust placed by clients in UBS PaineWebber's investment advice.

Cautionary statement regarding forward-looking statements

This communication contains statements that constitute "forward-looking statements", including, without limitation, statements relating to the implementation of strategic initiatives, including the implementation of the new European wealth management strategy, expansion of our corporate finance presence in the US and worldwide, and other statements relating to our future business development and economic performance, including the expected results of UBS Capital through the balance of 2001.

While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations.

These factors include, but are not limited to, (1) general market, macro-economic, governmental and regulatory trends, (2) movements in local and international securities markets, currency exchange rates and interest rates, (3) competitive pressures, (4) technological developments, (5) changes in the financial position or credit-worthiness of our customers, obligors and counterparties, (6) legislative developments and (7) other key factors that we have indicated could adversely affect our business and financial performance which are contained in our past and future filings and reports, including those with the SEC.

More detailed information about those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC, including UBS's Annual Report on Form 20-F for the year ended 31 December 2000. UBS is not under any obligation to (and expressly disclaims any such obligations to) update or alter its forward-looking statements whether as a result of new information, future events, or otherwise.